Election jitters start to impact NZ business confidence

Election jitters in New Zealand
boardrooms and a hard-hitting Australian budget have seen
the gap in business confidence levels between the two
countries narrow sharply over the last three months.

New Zealand business confidence for the next 12 months
has dropped 18%, from 88% in first quarter of this year to
70%, while Australia’s has rebounded from 36% to 50%,
according to the Grant Thornton International Business
Report (IBR) which surveyed businesses in 34 economies. New
Zealand confidence levels have been higher than Australia
since 2011.

Mark Hucklesby, Partner and National Technical
Director, Audit, for Grant Thornton New Zealand said the
shadow of the elections is definitely starting to fall on
New Zealand businesses.

“I have been in several
boardrooms over the last few weeks where the impact of the
elections has been discussed. It’s clear that the offshore
customers of many New Zealand businesses are seeking views
on the likely outcome of our pending election.

“One thing that these offshore customers want is
stability. Even though the National Party has a strong
majority, the quirks of MMP leave overseas business leaders
with a sense of unease which in turn dents confidence among
New Zealand business.

“This survey was conducted
before the Reserve Bank’s latest interest rate rise and I
suspect this move has probably further eroded confidence
levels given its impact on exchange rates,” he said.

Hucklesby said that despite the drop in confidence
levels, New Zealand is still ranked sixth in the world, one
place lower than last quarter. India (86%), Ireland (84%),
United Kingdom (80%), Germany (79%) and the United States
(74%) are ahead of us.

“This is still a very good
ranking. If you look at the rise in confidence throughout
the rest of the world, especially in Australia where
business confidence has climbed to its highest level since
2010, then there is no reason to think that the New Zealand
economy will not continue to perform strongly.

“The influence of Australia on New Zealand cannot be
underestimated. They are still our second biggest trading
partner after China and a buoyant economy in Australia is
beneficial to New Zealand. Australia’s strong business
performance through the Global Financial Crisis and the fact
they did not slip into recession was a real positive for
this country.

“I firmly believe that the ruthless
budget delivered mid-May in Australia helped their business
confidence level. They knew that something drastic had to be
done and the budget delivered some tough measures. Also, one
should not forget that while their budget figures aren’t
great, their economy is still ticking over strongly. Good
growth figures coming out of India and China have also
helped Australia,” he said.
ends

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